FD Vs PF, EPF, VPF

Money, it is that one thing around which our lives and the world revolve. Everything we do in our lives is either directly or indirectly connected to the act of earning, saving or spending money, with money ruling the roost in our day to day activities. Money is the harbinger of news, sometimes good and sometimes bad, turning normal people into Gods, wielding power like no other weapon. The fact is that there is no modern world without money, unless we are all willing to give it all up and lead the life of a hermit.

So we work hard to earn money, putting in blood, sweat and tears to life a decent life, but the thing about money is that it somehow evades us when we need it most. A good savings plan can offer some comfort, helping us believe that there is a back-up in case of financial emergencies, but finding the right back-up can be a difficult task. Money is hard to earn and easy to spend, so a good savings plan could mean the difference between a peaceful retirement and a tension filled life.

Fixed Deposits and Provident Funds are two popular investment and saving tools in India, both offering multiple benefits to people. Provident Funds are government supported retirement planning schemes, wherein individuals have the opportunity to invest in different kinds of provident funds. The Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) are two popular Provident Fund investment modes in India.

So which investment opportunity is better? FD, EPF or VPF? The following points could possibly help YOUR money hold its value during financial needs.

Know the terms

Fixed Deposits are accounts offered by banks wherein individuals can deposit money into the account for a particular time period. These deposits are generally payable only when the term is completed.

Employee Provident Fund is a provident fund for employees of companies, which is designed to provide financial stability post retirement.

Voluntary Provident Fund is a provident fund wherein individuals can choose to voluntarily contribute some percentage of their salary towards it.

Eligibility

Fixed Deposits – FDs can be opened by all residents, including minors, if they meet the eligibility criteria of the bank they wish to apply in. A few companies offer Company Fixed Deposit, which are open to individuals and are governed by the rules of the company.

EPF – Individuals who are employees of organisations are eligible to open an Employee Provident Fund account.

VPF – Only salaried individuals can open a Voluntary Provident Fund account.

Investment / Lock in period

The lock in period refers to the time duration involved for a particular investment to reach its maturity value.

FD – The Investment / Lock in period for FDs depends on the needs and requirements of the individual account holder. The investment term could range from 7 days to 10 years, offering flexibility and ease of handling to the investor.

EPF – The EPF is active till the individual concerned is an employee of the organisation. The invested amount can be paid either at retirement or on resignation.

VPF – This account is active till the individual is an employee of the organisation. The invested amount can be paid either at retirement or on resignation.

Thus FDs offer ease and flexibility in terms of investment period compared to EPFs and VPFs.

Interest Rates

The interest rate offered on investments is often the biggest deciding factor when choosing which option to pick. Bank fixed deposits offer interest rates ranging between 8.5 to 9% per annum, with company fixed deposits offering much higher rates, often ranging between 12-13% per annum. The interest rates are fixed by the individual bank or company concerned and often reflect the competitive nature of business.

The interest rates for PFs, including EPF and VPF are fixed by the government and currently stand at 8.75% per annum. These rates can be revised only by the government at its sole discretion.

Tax Benefits

It so happens that we often feel reluctant to part with our hard earned money, but paying tax is the duty of every individual who falls in the tax bracket. While one cannot avoid tax completely, FDs and PFs offer us the chance to reduce our tax burden to an extent. Individuals can claim deduction under section 80C of the Income Tax Act in case of Tax Saving Fixed Deposits, with the maximum deduction being Rs. 1.5 lakh.

Investments towards EPF and VPF are also eligible for deduction under Section 80C. Withdrawals from EPF are, however, taxed if the individual has been employed with the same employer for less than 5 years.

Investment amount/contribution

Planning for the future is an extremely crucial aspect of investing and miscalculating the investment amount could leave us hanging in the future. FDs have no limit on the investment amount, with the investments depending on the capability of the individual concerned. Some banks are open to investments running into crores, with the investment amounts being subject to the policies followed by the banks.

In case of EPF, both the employer and employee are expected to contribute 12% of the basic and DA every month. The contribution can be increased as per the needs of the employee. In VPFs the employee can choose the amount he/she wishes to invest, as a percentage of their DA and Basic Salary, with no contribution from the employer. Contributions to VPF are voluntary and are up to the individual concerned.

Premature withdrawals

Most banks allow premature withdrawals of Fixed Deposits, subject to the policies of the bank and can charge a certain fine on such premature withdrawals.

Premature withdrawals are permitted for EPF and VPF, though premature withdrawal of EPF with service less than five years would attract tax deductions, ranging from 20% to 34%, depending on certain conditions.

Loans

Financial emergencies can arise at any moment and loans can often quell them temporarily. Most banks offer an overdraft facility against FDs, with the loan amount being as high as 90% of the amount in the FD. The interest rate on these loans is generally 1-2% higher than the current interest rate being paid on the FD.

Individuals can avail loans against their EPF/PPF amount, subject to them meeting certain criteria. Loans against these are available only for 9 reasons, education, marriage, medical treatment, home purchase, home modifications, lockouts, home-loan payments, calamities and if the individual needs money one year before his/her retirement.

The table below mentions the differences between FDs, EPFs and VPFs.

Criteria

FD

EPF

VPF

Eligibility

Open to all

Only Salaried Individuals

Only Salaried Individuals

Investment Period

7 days to 10 years

Till retirement or resignation

Till retirement or resignation

Interest Rates (Per annum)

8.5-9% for bank FDs and 12-13% for company FDs

8.75%

8.75%

Tax Benefits

Available under Section 80C

Available under Section 80C

Available under Section 80C

Investment Amount

Flexible

12% Basic + DA by both employee and employer

Voluntary

Premature Withdrawals

Available

Available

Available

Loans

Available

Available for certain needs

Available for certain needs

FD or PFs? Where to invest?

Investments should be done keeping in mind future requirements and current income, and both FDs and PFs (EPF and VPF) offer excellent features to investors. FDs can be an additional investment for individuals above their investments in EPF or VPF. For non-salaried individuals, an FD is the best form of investment as they are not eligible to invest in EPF and VPF.

FDs offer more convenience and flexibility in terms of the investment amount and individuals can customise it to suit their financial needs, with the higher interest rate helping their money grow faster when compared to EPF or VPF. The investment term options make FDs more attractive, as the term can be chosen based on current needs, allowing people the opportunity to financially plan for even short term needs, which is hard to do in case of EPF and VPF.

Conclusion

A lifetime of hard work could dematerialize in one reckless moment and life isn’t always kind to provide second chances. Investing in the right plan ensures safety of not just your money but also your family and way of life. FDs, EPFs and VPFs are unique in their own way, and not investing in them could come back to haunt us. They help our money grow with us, so that we can have something to fall back to in our old age or times of distress.

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FD Vs PF, EPF, VPF Reviews

I am having a savings account with State Bank of India hence i have selected the Fixed deposit investment scheme with them. They are providing the interest rate of 8%. I have invested the money 2 years back and there is a lockin period of 72 months.

Kotak Mahindra bank is a reliable bank and good management thats the reason i have invested the fixed deposit scheme in this bank. They have provided me a interest rate of 7% and i have kept for the period of 1 year and 1 month. Overall, I'm satisfied with their services.

I have purchased HDFC Fixed deposit which I am renewing for every 13 months. They have given me an interest rate of 7% and There is no processing fee and there is no locking period as well. If I'm withdrawing FD amount before locking period, they are charging some amount.

I went to the nearby branch for the Punjab National Bank for taking my fixed deposit as per my family members recommendation. I have invested the money of Rs. 50000 there was a lockin duration of 6 years when i withdraw the money, i got the money of Rs.1 lakhs. They have offered me a interest rate of 7%.

I was having my savings account from Post office hence i have invested my money into Post office Fixed deposit scheme. I have invested the money of Rs. 25000. There is a lockin period of 10 years. I have invested the money in the year of 2011. Post office service is proper. Overall, I'm happy about the services.

I have invested some money as a Fixed deposit in HDFC Bank and the interest rate is not that much great because they are giving interest as compared to others. I have invested the money of Rs. 3L and there is a locking period of 5 years. Its 7% interest rate. If they are increasing the interest rate, it would be fine. Since I do all my transactions with this bank, I have selected same for my FD as well.

I have chosen my fixed deposit scheme from State bank of India because I'm maintaining my salary account with them and they provided rate of interest is fine for me. I have invested the money of Rs. 2.75 lakhs. There is a locking period of 45 days. They are giving interest rate of 4.5%. Overall, I'm satisfied with their services.

I have been investing the money of Rs. 3 lakhs for the fixed deposit. I have selected Kotak mahindra bank for the FD because their net banking facility is very different when i compared to other. I can access everything regarding the account hence its easy to handle the transactions. I'm not sure about the interest rates. 7 months before, i have invested the money.

Its because of the competitive interest rates, i have selected the Fixed deposit in Kotak Mahindra bank. I have invested the fixed deposit 1.5 years ago and there is a lockin period of 5 years. They have invested the amount of Rs. 7.5 % and the employees are helpful in the branch.

I have a Fixed deposit in Axis bank. I have invested the money of Rs. 10000 for two FDs. There is a lockin duration of 1 year. They are giving a interest rate of 7%. Through net banking, i have activated this Fixed deposit. There is no tax benefits available. Axis bank service has been good. Overall, I'm happy about their services.

Since last 15 years, i have a account with Oriental bank of commerce thats the reason i have invested the money in fixed deposit with the same bank. I have invested the amount of Rs. 11 lakhs. They are giving the interest rate of 6.5%. There is no locking period but i have chosen the duration of 1.5 years. There is no additional charges deducted for this fixed deposit.

Interest rate is very low in Indian post office Fixed deposit scheme because they are providing only 8.5%. I have chosen this office because of the child benefits. I have invested the money of Rs. 1.5 years. Its 3 years lock in period. Overall, I'm satisfied with the service provided by post office employees.

I have invested the money in SBI for a fixed deposit and based on my wife recommendation i have chosen it. They are providing the interest rate of 7.25%. They have option to select the lock in period in that i have chosen 5 years. We had visited their branch and the response was good.

Its easy accessible and to redeem so that i have invested the money in Fixed Deposit with HDFC BANK. I have invested the money of Rs. 2.5 lakhs and they have provided me a interest rate of 7.5%. There is no locking period. I didn't got any additional charges till now.

I have paid the money of Rs. 4.5 lakhs as a fixed deposit in the Indian post office. For the safety purpose, i have chosen the post office account. They are offering me a interest rate of 7.9%. There is a lockin period of 5 years. If i withdraw the money in 1 year, they will reduce the interest rate of 2% and after 3 years, its 1%.

Interest rates are less in Central Bank of India so I had taken a fixed deposit. I have invested the money of Rs. 1 lakh in my wife's name. Branch is near from my place so I have chosen this bank. Yearly once, I get the money of Rs. 6,765 for the interest. There is a locking period of 1 year.

I am doing Fixed Deposit with ICICI BANK and its been around 5years. They haven't been paying good interest and its more or less same like other banks as I used to hold my salary account with ICICI, I have decided to be with one bank. There is no locking period and its flexible. They do give good support and the app is user friendly. Even deposit account can be opened through i-mobile or net banking itself.

I had a Fixed Deposit in State Bank of India, I have completed the tenure before 3months ago. I have no issues with the customer service. They are given me 7% interest rate for 2years. There is no profit and processing fee. I got an online access, where I can check the interest rate anytime on the YONO app or else SBI online.

I have invested some money through FD. My salary account is in SBI so i have a zero ATM charges and the limit is not actually set by SBI. They do have short term FDs which is pretty good. I have invested the money of Rs. 60000 and the interest rate is 10.01% for the tenure period of 16 months. There is no lockin period. There is no hassle to getting the money back.

I have invested the money in Dena bank through Fixed deposit and the growth is not that much good. They are not taking any hidden charges. Only because of the Government undertaken bank, i have selected them. They are providing a interest rate of 6% per annum. I have invested the money of Rs. 2 lakhs. There is a lockin period of 1 year.